The relationship between employee turnover rate and organisational performance in South Africa.

Abstract

Managers have become conditioned to believe that employee turnover is detrimental to organisational performance and has to be reduced from its current state as a means of showing improvement. The outcomes of numerous studies, spanning more than 30 years, have pointed to various relationships between employee turnover and organisational performance, varying from linear to curvilinear. The focus of this study was to ascertain if a curvilinear relationship exists between employee turnover rates and organisational performance that could inform an optimal employee turnover rate for organisations in South Africa. The research design took the form of a cross-sectional study that collected quantitative data through the use of a self-administered web-based questionnaire. Through multiple linear and non-linear regression, the study found that voluntary employee turnover rate significantly predicted financial and organisational performance through a curvilinear relationship and more specifically a cubic function. The curvilinear (cubic) relationship between voluntary employee turnover rate and organisational performance, supports assertions in the literature that the respective models should not be seen as distinct separate views, but can be integrated to produce an overall descriptive model. The optimal functional voluntary employee turnover rate for organisations in South Africa was calculated to be between 14 and 19%. The existence of a curvilinear relationship implies that managers and business leaders can no longer assume that a lower employee turnover rate is beneficial to the organisation. Key terms used: (i) employee turnover rate (ii) voluntary turnover (iii) involuntary turnover (iv) functional turnover (v) dysfunctional turnover (vi) organisational performance (vii) productivity (viii) innovation (ix) curvilinear (x) optimal.